The Affordable Care Act established the Health Insurance Marketplaces to provide access to private, affordable, and comprehensive healthcare coverage for individuals that do not already have access to coverage options through an employer or a government-run program, such as Medicare or Medicaid. As of 2021, the Marketplaces are serving 12 million individuals and an estimated 12.1 million individuals remain uninsured and eligible for Marketplace coverage.
Our KPMG analysis found that 13 states may find it financially feasible to set up their own Health Insurance Marketplaces within the next 10 years. Specifically, our analysis suggests that the following states can generate sufficient user fees to run their own Marketplace: Florida, Texas, North Carolina, Georgia, Illinois, Michigan, South Carolina, Missouri, Alabama, Tennessee, Utah, Wisconsin and Oklahoma.
If all 13 states transition to a State-based Marketplace (SBM), the federal government, specifically the Centers for Medicare & Medicaid Services (CMS), could see an estimated drop of more than 75 percent in annual user fees paid by health insurers, which would have a substantial impact on CMS’s ability to maintain its current operations to support the Marketplaces remaining on its federal platform.
A SBM may be an exciting proposition for some states. Certain states that have already set up SBMs have benefited from greater flexibility, timely access to enrollment data, cost savings, opportunities for advanced technology platforms and lower insurance premiums. Yet other states, even if viable, may find that the cost or effort to establish and maintain a SBM exceeds the benefit, given the customer experience available through HealthCare.gov.
In the analysis, KPMG concludes that states need to consider three factors before converting to state insurance marketplaces: financial viability, transition feasibility and value to constituents over what can be provided by HealthCare.gov. Continuous communication between CMS and the states focused on potential transition activity will be essential to the near- and long-term success of any Marketplace changes.